Critics of rational expectation theory believe:
A)most people are truly not very informed about the effects of a policy change.
B)most people do not adjust their behavior very rapidly to changes in government policies, in part because they are not informed about the effects of policy changes.
C)that wages and prices are not as flexible as the rational expectation theory assumes.
D)all of the above.

Question

Critics of rational expectation theory believe:
A)​most people are truly not very informed about the effects of a policy change.
B)​most people do not adjust their behavior very rapidly to changes in government policies, in part because they are not informed about the effects of policy changes.
C)​that wages and prices are not as flexible as the rational expectation theory assumes.
D)​all of the above.

Quizplus · Accepted Answer

Critics of rational expectation theory argue that people may not have enough information or be able to adjust their behavior quickly enough to match the predictions of the theory. They also argue that wages and prices may not be as flexible as the theory assumes, which can lead to unexpected outcomes when policies are implemented. Therefore, all of the above options are valid criticisms of the theory.

Critics of Rational Expectation Theory Believe